When you are selling a property it is common to list the 'Chattels' which you are to be selling with the building. Chattels are items which are able to be removed from a property without too much effort, and which were never intended to permanently form part of the structure. Common examples are an oven, paintings or a fridge. Occasionally they can be large eg a spa pool or garden shed. If it can fit on a truck, it may well be a chattel.
The general rule in the various versions of the Auckland District Law Society ("ADLS") sale and purchase agreements (the most commonly used agreements in New Zealand) are that the chattels you list in the agreement should be provided to the purchase in 'reasonable working order, but in all other respects in their state of repair as at the date of the agreement (fair wear and tear excepted)'. Fair enough you would say – they can be a bit worse for wear, but as long as they are working 'reasonably', then no problem. They are second-hand after all. If something does not work you could amend your agreement to specify that chattel comes 'as is, where is' or perhaps exclude it entirely from the agreement.
Current wording in the ADLS agreements creates more room for potential misunderstanding and in turn, disputes. The warranties clause in the current (2021) ADLS agreements contain the earlier requirements around chattel condition but include that 'all plant, equipment, systems or devices which provide any services or amenities to the property, including, without limitation, security, heating, cooling or air-conditioning' must also be provided in reasonable working condition. It does not specify that these items need to be individually listed in the agreement for this warranty to apply.
It also starts to create more confusion as to what actually might be a chattel and what is intended by the inclusion of the wording around plant (commercial term), equipment, system or device. Looking to the definitions within the agreement provides little help. Arguably, the wording now creates a warranty whereby you, as vendor, are warranting to your purchaser that any fireplace (a fixture), electrical system (fixture), HRV system, irrigation and drainage, sewage or septic system, wastewater etc are provided in reasonable working order. Can you be sure of this? Could building cladding be argued as system under this clause? Roofing, paint or guttering? A quick internet search will show you that many businesses supplying these items consider them as 'systems'. In a commercial building there may be fire control and egress systems.
Hopefully, you can see that while the standard warranty is traditionally designed to relate to chattels there is room for misunderstanding, claims by purchasers and a higher lawyer's invoice where the wording, and any issues specific to your property, have not carefully been considered.
The message of this article is to read the warranty section of your sale and purchase agreement closely. Know what you are promising. If there are any chattels, systems or devices that will be sold with your property please consider the warranties you are giving the purchaser and ask yourself if perhaps they should be amended. Any issue which may arise can be overcome most effectively by working with your lawyer and real estate agent before your agreement is signed.
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Written by Hamish Coupe
© McVeagh Fleming 2021
This article is published for general information purposes only. Legal content in this article is necessarily of a general nature and should not be relied upon as legal advice. If you require specific legal advice in respect of any legal issue, you should always engage a lawyer to provide that advice.